Tag: health care sector

The effect of competition on the quality of health care remains a contested issue. Most empirical estimates rely on inference from non experimental data. In contrast, this paper exploits a pro-competitive policy reform to provide estimates of the impact of competition on hospital outcomes. The English government introduced a policy in 2006 to promote competition between hospitals. Patients were given choice of location for hospital care and provided information on the quality and timeliness of care. Prices, previously negotiated between buyer and seller, were set centrally under a DRG type system…

Our results constitute some of the first evidence on the impacts of a market-based reform in the health care sector. We find strong evidence that under a regulated price regime that hospitals engage in quality competition and that the 2006 NHS reforms were successful. Within two years of implementation the NHS reforms resulted in significant improvements in mortality and reductions in length-of-stay without changes in total expenditure or increases in expenditure per patient. Our back of the envelope estimates suggest that the immediate net benefit of this policy is around £227 million. While this is small compared to the annual cost of the NHS of £100 billion, we have only calculated the value from decreases in death rates. Allowing for improvements in other less well measured aspects of quality will increase the benefit, as will any further falls in market concentration which may occur as the policy continues in operation. If the UK were to pursue policies that lead to deconcentration of hospital markets, the gains could be substantially larger.

These results suggest that competition is an important mechanism for enhancing the quality of care patients receive. Monopoly power is directly harmful to patients, in the worst way possible - it substantially increases their risk of death. The adoption of pro-market policies in European countries, as well as policies directed at increasing or maintaining competition such as antitrust enforcement, appear to have an important role to play in the functioning of the health sector and assuring patients’ well being.

Most international comparisons conclude that America’s health care sector under-performs those of other advanced nations. Aside from other serious flaws, those studies typically ignore each nation’s contribution to medical innovation – the discovery of new knowledge and practices that improve health in all nations. Today, the Cato Institute releases a new study – the most comprehensive study of its kind – that helps fill that void.

To date…none of the most influential international comparisons have examined the contributions of various countries to the many advances that have improved the productivity of medicine over time…

In three of the four general categories of innovation examined in this paper — basic science, diagnostics, and therapeutics — the United States has contributed more than any other country…In the last category, business models, we lack the data to say whether the United States has been more or less innovative than other nations; innovation in this area appears weak across nations.

In general, Americans tend to receive more new treatments and pay more for them — a fact that is usually regarded as a fault of the American system. That interpretation, if not entirely wrong, is at least incomplete. Rapid adoption and extensive use of new treatments and technologies create an incentive to develop those techniques in the first place. When the United States subsidizes medical innovation, the whole world benefits. That is a virtue of the American system that is not reflected in comparative life expectancy and mortality statistics.

Policymakers should consider the impact of reform proposals on innovation. For example, proposals that increase spending on diagnostics and therapeutics could encourage such innovation. Expanding price controls, government health care programs, and health insurance regulation, on the other hand, could hinder America’s ability to innovate.

In this Cato video, Goldhill explains why a consumer-driven health care sector would never produce the often horrific problems we see in American medicine, and why the legislation moving through Congress fails to address those problems.

I’m not a fan of the House Democrats’ proposed takeover of the health care sector. (If there’s one thing that legislation is not, it’s “reform.”) But at least House Democrats were honest enough to include the cost of the $245 billion bump in Medicare physician payments in their legislation, unlike some committee chairmen I could mention.

Unfortunately, House Democrats have since decided that dishonesty is the better strategy. They, like Senate Democrats, now plan to strip that additional Medicare spending out of health “reform” and enact it separately. (Democrats are already trying to exempt that spending from pay-as-you-go rules, making it easier for them to expand our record federal deficits.) Why enact it separately? Because excising that spending from the “reform” legislation reduces the cost of health “reform”!

But why stop there? Heck, enact allthe new spending separately, and the cost of “reform” would plummet! Enact the new Medicaid spending separately, and the cost of “reform” would fall by $438 billion! Do it with the subsidies to private health insurance companies, and the cost of “reform” would plunge by $773 billion! All that would be left of “reform” would be tax increases and Medicare payment cuts. Health “reform” would dramatically reduce federal deficits! Huzzah!

Except it wouldn’t, because at the end of the day Congress would be spending the same amount of money.

The only good news may be this. If this dishonest budget gimmick succeeds, then Congress will have “fixed” Medicare’s physician payments. Absent that “must pass” legislation, the Democrats health care takeover would lose momentum, and would have to stand on its own merit. That would be good for the Republic, though not for the legislation.

Goldhill analyzes why America’s health care sector is so dysfunctional and concludes that “this generation of ‘comprehensive’ reform will not address the underlying issues, any more than previous efforts did. Instead it will put yet more patches on the walls of an edifice that is fundamentally unsound—and then build that edifice higher.”

The event will take place in room B-340 of the Rayburn House Office Building at noon on Thursday, October 1. Click here to register.

Finally, a really disturbing video showing Christina Romer, chair of President Obama’s Council of Economic Advisors, refusing to admit to a congressman that the president’s reform plan would oust Americans from their current health plans.